Professional Documents
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Abstract
The paper proposes a stakeholder systems model of corporate governance to address issues of contribution and commitment with particular focus on human resource management (HRM) contexts. Its theme is that effective governance can be aligned with social responsibility, and incorporating stakeholder views in decision-making processes enhances performance and commitment in contemporary organisations. A stakeholder analysis of performance management systems in UK academic institutions is used as a case study. This illustrates the value of the approach as a mode of organisational enquiry, and as a method of arbitrating between stakeholder claims. The paper advocates a stakeholder systems model of HRM as a means of developing robust and ethical systems. The model delineates design, operation and evaluation stages of HR systems, links these to distributive and procedural dimensions of organisational justice, and suggests how quantitative and qualitative measures can be combined to assess system effectiveness.
Introduction
A particular form of personnel management constitutes the dominant approach to managing people in developed economies at the beginning of the 21st century. Its proponents claim that in title and philosophy human resource management (HRM) is fundamentally different from the old style personnel management that preceded it. Initially in the USA, then later in the UK HRM became so widely adopted as to be described as the new orthodoxy [45]. To many, the advent of HRM marked the coming of age of human resources (HR) as a management discipline- distancing it from inauspicious beginnings as a welfare activity and long periods as a low level, second order function acting at the behest of more established management specialisms [32]. To achieve this HR practitioners had to give greater importance to operating in a way that would gain them acceptance as business partners by management colleagues [39] than to their alternative role of employee champions. However this instrumental focus on utilising people for maximum commercial advantage was regarded as an acceptable price to pay in the battle for recognition and status. Personnel practitioners could at last take their place at the top management table, and it was HRM philosophy and practices that made this possible. However, in any battle there are casualties, and in this campaign it was employees, trade unions, communities and the environment that bore the brunt of these. Downsizing, de-recognition, and plant closure were the price many had to pay in HRs drive for competitiveness and profitability [14] and issues of ethical conduct and employee voice were often sidelined when HRM was debated [17]. The paper questions the relevance of the dominant form of HRM- termed mainstream HRM- to contemporary organisations, and advocates an alternative form of employee governance. The concept of mainstream HRM [23]- defined later in the paper- is used as an idealtype for discussion purposes but the author acknowledges many different forms of HRM exist in practice.
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century organisations, and is therefore a less appropriate mode of employee governance for today's business environment. It suggests an alternative view of HR systems as the negotiated outcome of salient stakeholder groups facilitates more democratic forms of representation and accountability. Organisations need to identify, consult and manage a number of internal and external stakeholders to operate successfully in the new business context, and thereby combine effective corporate governance with social responsibility [27]. The paper emphasises the importance of viewing employees as a significant stakeholder group, and demonstrates that incorporating employee views in the design of HR systems can enhance performance and commitment. This is especially important in organisations reliant on the contribution of professionals who have significant autonomy and discretion in their work roles, and are potentially mobile if they feel the psychological contract with their employing organisation has been violated [49]. In its first section the paper identifies mainstream HRMs central tenets together with hard and soft modes of implementing these. The appropriateness of this form of HRM to contemporary organisations is then assessed from ethical, methodological and effectiveness standpoints- prior to offering an alternative stakeholder systems model of corporate and employee governance. A performance management case study is used to illustrate the benefits of the stakeholder systems approach to both researchers and practitioners. For researchers, the study confirms stakeholder analysis as a robust and ethical method of organisational analysis. For practitioners, it provides a way of identifying and arbitrating between stakeholder claims that incorporates effectiveness and organisational justice considerations. The paper then demonstrates how a stakeholder systems model- incorporating design, operation and evaluation stages- can facilitate effective and ethical HRM. The model also offers a vision of how stakeholder-accountable organisations might operate in the new millennium. Finally, the paper identifies issues for a continuing HR research agenda that include: factors influencing stakeholder saliency, issues of stakeholder representation and accountability, and methods of promulgating stakeholder-accountable business and HR practice.
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The papers central proposition is that stakeholder systems approaches enable effective governance to be combined with social responsibility in a way that avoids twin extremes of employee exploitation and utopian ethical stances. In this it acknowledges that, while employing those on the basis of their contribution to organisation effectiveness is fundamental in market economies, both justice and effectiveness rationales are served by providing employees- and another salient stakeholder groups- with a voice in HR decision-making [47]. This recognises people are employed as means to an end- organisation effectiveness- but not solely for this instrumental purpose. Organisations owe employees- and another stakeholder groups- a general duty of care and a voice in decisions that affect them. Mainstream HRMs inability to provide this is demonstrated by considering its relevance to the contemporary business environment; then by examining three criticisms of it that have particular significance in this context.
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burgeoning interest in corporate social responsibility- relevantly defined as understanding and acting upon stakeholder and wider interests in order to deliver obligations to society [46]-, ethical conduct, and corporate governance. However its potential contribution to developing ethical HR practice has so far been overlooked [69].
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Organisational characteristics of BSO have striking similarities to those in universities and colleges. Both have powerful stakeholder groups with different objectives operating within a public service ethos. Both aspire to be learning organisations and suppliers of high quality professional services. Staff within each are archetypal professionals- potentially mobile and not easily controlled by non-specialist managers or administrators. Moreover, both wish to devise and operate effective HR systems that their stakeholder groups will buy into. The studys conclusions confirm stakeholder analysis as a robust and insightful method of organisational enquiry that can reconcile disparate stakeholder perspectives on HR systems in an effective and equitable way, and provides principles for a stakeholder systems model of HRM.
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Senior management decisions on stakeholder saliency Line managers Employees HR Specialists Labour Representatives Fiduciary Stakeholders: Shareholders customers Silent Stakeholders: the community, the environment
Stakeholder synthesis- agreement on HR policy Perceived fairness of / agreement on aims and objectives of HR policy System procedural justice
HR practice Perceived fairness of HR systems: fair hearing, access to information, opportunity to challenge etc System procedural justice
HR system outcomes Perceived fairness of HR decisions on access to training, placement, promotion, salary progression etc. Impact on motivation and performance System distributive justice
HR evaluation measures Organisation and wider stakeholder satisfaction? Efficacy- do HR systems work? Efficiency- do HR systems operate cost effectively? Effectiveness- do HR systems contribute to organisation goals? Equity do HR systems embody fairness and integrity? System evaluation
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Conclusion
Key themes of the paper are summarised below. The paper advocates stakeholder analysis as a means of recognising competing stakeholder claims within a more democratic, accountable and ethical HR philosophy; and emphasises the significance of employee views within this. Research evidence suggests employee influence on HR systems enhances levels of acceptance, commitment [65], job satisfaction [43], and organisational justice [36] The case study cited aligns with this in confirming employee views of organisational justice are influenced by the acceptability of HR systems and decision criteria as well as by their outcomes. More formalised stakeholder involvement is facilitated by its incorporation within a stakeholder systems model of HRM. These conclusions are significant within a continuing HR research agenda that includes factors influencing stakeholder saliency [30], issues of stakeholder representation and accountability, and methods of promulgating stakeholder-accountable business and HR practice; as well as to practitioners seeking to evaluate and develop existing HR systems. Organisations increasing dependence on the commitment of those who work for them places HR philosophy and practice at the heart of corporate strategy. This is especially important in knowledge based organisations where employees represent the only sustainable source of competitive advantage [8 & 44] Acceptance of the stakeholder-accountable view of organisations by those involved in corporate governance, and the significance of employee views within this, gives those in HR the opportunity to lead strategy debates at the heart of the business [33]; to develop sustainable 'high performance HR practices' [41]; and to stimulate due consideration of ethical issues in each of these [71]. A new philosophy of HR and related OD strategy coalesce within the stakeholder-accountable HR system offered. This model incorporates the why and the how of stakeholder involvement when developing effective and ethical HR systems, and provides a framework for organisation analysis and action research. The stakeholder systems model makes a significant contribution where the viability of the developed system is dependant on its acceptability to a number of potentially conflicting stakeholder groups, or where decision quality is likely to be enhanced by consideration of different stakeholder viewpoints. However, models and techniques for socially responsible HR practice are insufficient in themselves. The more significant question is how to persuade organisations operating in market economies to incorporate a greater ethical dimension in their decision making? Purists who believe weight of moral argument will alter priorities of institutional investors are utopian, while those who seek ethical emphasis through greater regulatory control are unlikely to attract government support [7]. Instead, a coherent, positive, practitioner-focused message that corresponds with the zeitgeist of the time is suggested as the best way to influence management discourse and practice. Financial malpractice in organisations and people management concerns regarding employee voice and commitment provide compelling evidence of the need for ethical standards, integrity and transparency at all levels of corporate governance. Stakeholder perspectives can have a similar impact on management thinking in this decade in the way that excellence debates struck a chord with quality management concerns in the 1980s because of the alignment between contemporary business issues and political discourse. Stakeholder based approaches offer both a philosophy and a method of putting this into practice. The study also demonstrates the integrity and value of stakeholder analysis as a middle ground mode of organisation enquiry. While it leans toward a subjective and interactionist view of organisations, it offers the possibility of incorporating quantitative methods and analysis alongside this. Its scope to combine different research philosophies and methods in a pragmatic but robust way will appeal to those who put dialogue and accommodation between different research paradigms before purity of approach [9]. In summary, the paper identifies methodological, effectiveness and ethical critiques of mainstream HRM as an appropriate way of managing people for organisations of the twenty-first century and suggests an alternative philosophy and practice. It addresses the methodological critique by advocating alternative organisation development processes that respect the characteristics of an organisation and its stakeholder constituencies, the effectiveness critique by proposing that organisation systems are shaped by those who will be subject to them, and the ethical critique by offering a stakeholder-accountable philosophy and system of organisation governance. Conclusions from the paper therefore support the normative or organisational justice
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case for incorporation of views of key stakeholder groups in HR system design and modification. Progression from the stakeholder analysis stage into a subsequent stakeholder synthesis process accords with an instrumental or managerial use of the theory to achieve organisationally desirable outcomes. It reaffirms the research and managerial benefits of viewing organisations as dynamic coalitions of interest groups, the utility of the stakeholder concept for identifying rival stakeholder claims and arbitrating between them, and the benefit of such stakeholder analysis interventions at corporate governance and HR system level. The effectiveness and organisational justice outcomes of such an approach may enable it to be regarded as a best practice model.
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